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The Softer Side of Sears

The road to cool is paved with potholes.

I know what you're thinking. Was Sears ever cool? Oh, I'm sure it was at one point. Maybe you have to go back somewhere between the company's mail-order roots in the late 19th century, or the construction of the Sears Tower in the early 1970s, but there were some fun times to be had there, for sure.

Last night, the company announced that it was hiring a Best Buy(NYSE:BBY) executive to serve as its CCO -- Chief Customer Officer. Even if it sounds as hokey as Build-A-Bear Workshop(NYSE:BBW) tapping its chieftain as its Chief Executive Bear, a CCO is a real position in consumer-driven industries.

Welcome to Sears, John Walden. The Sears Tower is nothing compared to the height of the daunting task that awaits you.

Out of the blueBest Buy is a champ in customer-centric retail. It has never pestered patrons for their phone numbers like its largest small-box rival. It never resorted to hiring a commissioned sales force to go hounding its patrons like its largest big-box rival. To be fair, RadioShack(NYSE:RSH) and Circuit City(NYSE:CC) have since ceased those unsavory practices, but Best Buy has been able to take the high road, and it has paid off handsomely.

Best Buy has been nearly a 50-bagger over the past ten years. Sears has nearly doubled since merging with Kmart two years ago, but it was floating listlessly before that. Earnings have improved since the union, but the top-line growth has been stagnant. Sears is no doubt counting on Walden to help change that, but it's not going to be easy.

Best Buy was able to drum up customer loyalty through things like its Reward Zone program, which mailed out gift certificates to frequent shoppers. That wouldn't be an easy sell at Sears.

On the thrifty side, rivals like Wal-Mart(NYSE:WMT) offers huge grocery selections to draw in a predictable flow of patrons week after week. Do you know of any habitual Sears shoppers? Even at its Kmart stores, where supermarket staples abound, Sears Holdings has never been able to compete against Wal-Mart on price, so it becomes simply a battle of convenience.

This isn't to say that Sears doesn't have its fan base. Craftsman is a toolbox goldmine. Plenty of folks swear by Sears' Kenmore appliances. However, these aren't exactly consumer nondurable items. If Sears succeeds in surpassing customer expectations -- an aspiratory hallmark for any budding CCO -- you won't need to replace that DieHard battery or Kenmore sewing machine for years.

The odd coupleA CCO would have loved the old Sears. The company was perpetually in contact with its consumers. Beyond its namesake stores, it reached out to customers through entities like Allstate insurance, the Dean Witter brokerage, Discover credit cards, and the Prodigy online service, which were welcomed routinely into the lives of inviting patrons.

If Prodigy were still a force in online services, Walden's job would have been a breeze. In fact, I probably wouldn't have had to even write this article, because the Sears brand would be interwoven deeper into our shopping habits' fabric, and it would have been an e-tailing juggernaut.

But we can't live in the past. Sears can't get to us in every credit card billing statement, stock purchase confirmation, or Internet welcome screen. It's going to have to earn the introductions.

Kmart and Sears have their work cut out for them. Theirs was one of the ugliest marriage portraits in retail history, but each company has tried to matter in the "cheap chic" space that has catapulted Target(NYSE:TGT) higher over the years. Between Lands' End at Sears and the Martha Stewart product lines at Kmart, they're stocking their shelves respectfully. The problem is the branding issue.

Will Walden succeed in reinventing Sears and Kmart as lifestyle brands? Are stickier in-store promotions the ticket to creating a rabid throng of chronic shoppers? Does the company have the infrastructure mettle to matter in e-tail, where price-comparison sites are just a click away?

These are meaty questions, but don't pity Walden. The one good thing about scaling the Sears Tower is that when you start at the bottom, it's not scary to look down.

Best Buy is a Motley Fool Stock Advisor recommendation. Wal-Mart has been singled out as an Inside Value stock pick. Free 30-day trials are await anyone that clicks the pretty blue links.

Longtime Fool contributor Rick Munarriz is proud to claim that his first job in high school was selling maintenance agreements for Sears. He didn't last long, though. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Author

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time with more than 20,000 bylines over those 22 years. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he splits his time living in Miami, Florida and Celebration, Florida.
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